This document discusses the progress and policy drivers of clean energy investment and identifies challenges and solutions for power systems with high renewable energy penetration. Renewable energy costs have fallen dramatically in recent years while global investment has reached record highs, driven by renewable portfolio standards and mandates in California, Europe, China and other jurisdictions. Concerns about the variability of wind and solar power are addressed by solutions such as energy storage, demand response and gas backup generation. The document argues for "investment-grade policy" characterized by performance incentives, long time horizons, siting and contract certainty to reduce costs and scale up deployment of clean energy.

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INVESTMENT-
GRADE POLICY
HAL HARVEY

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SOME AMAZING PROGRESS
Clean energy costs are falling…

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SOME AMAZING PROGRESS
…While capacity is rising and replacing fossil fuels

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SOME AMAZING PROGRESS
Global clean energy investment is at an all-time high
$329 billion in 2015

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DRIVEN BY POWERFUL POLICY
RENEWABLE PORTFOLIO STANDARDS
CA: 50%
by 2030
HI: 100%
by 2045
VT: 75%
by 2032
ME: 40%
by 2017

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DRIVEN BY POWERFUL POLICY
RENEWABLE PORTFOLIO STANDARDS
EU
 20% renewables by 2020
Denmark
 100% renewables by 2050
Sweden
 49% renewables by 2020
(already met)

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DRIVEN BY POWERFUL POLICY
Chinese mandates
 20% renewables by 2030
 Cap-and-trade
 Peak coal
 700 GW renewables
installed by 2030

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0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Generation(MW)
Time of Day
CA High Load Case Profiles
January 2020
Load
CONCERNS
THE POWER SYSTEM
 Variability

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0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Generation(MW)
Time of Day
CA High Load Case Profiles
January 2020
Load
Wind
CONCERNS
THE POWER SYSTEM
 Variability

10. 10
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Generation(MW)
Time of Day
CA High Load Case Profiles
January 2020
Load
Wind
Solar
CONCERNS
THE POWER SYSTEM
 Variability

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0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Generation(MW)
Time of Day
CA High Load Case Profiles
January 2020
Load
Net Load
Wind
Solar
CONCERNS
THE POWER SYSTEM
 Variability

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0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Generation(MW)
Time of Day
CA High Load Case Profiles
January 2020
Load
Net Load
Wind
Solar
6,300
MW in 2
hours
13,500
MW in 2
hours
CONCERNS
THE POWER SYSTEM
SOLUTIONS
 Energy Efficiency
 Demand response
 Fast-ramping natural gas
 Storage technologies
 System optimization

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POWER SYSTEM PROBLEMS
Physical: System balancing
Economic: Utility reward systems
Policy: Both of the above, plus
creating certainty

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FUTURE OF UTILITY POLICY
EXAMPLE: STAIRSTEP CAPABILITIES MARKET
 Value capability, not energy
 Make time horizons comport with
investment horizons
Years
Energy
Minutes
Capability
VS

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FUTURE OF UTILITY POLICY
SOFT COSTS
U.S. soft costs are 2X higher
than Australia’s, and 4X
higher than Germany’s

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WHAT IS INVESTMENT-GRADE POLICY?
 Reward performance (e.g. RPS)
 Continuous improvement
 Long time horizon
 Siting certainty
 Pre-cooked PPAs
 Contract sanctity
 Minimize soft costs
 This is the formula for
Investment-Grade
Policy
 This will slash costs
and volumes will
explode

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IF YOU REDUCE RISKS, YOU SLASH COSTS
LCOE of solar doubles when interest rates increase from1% to 11%
Effect of WACC
on LCOE,
constant GHI

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WHAT INVESTORS NEED TO DO
 Communicate, clearly and emphatically, that they are ready to
invest, given good policy
 Enunciate the precepts of good policy: Long-term, continuous
improvement, contract certainty, siting certainty
 Deliver that message to key venues:
 Governors, PUCs, Energy Ministers

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THANK YOU
@HAL_HARVEY
@ENERGYINNOVLLC
HAL HARVEY
WWW.ENERGYINNOVATION.ORG